PANAMA COUNTRY MONOGRAPH

A Publication of Live and Invest Overseas

PANAMA COUNTRY MONOGRAPH

By: Roxana Lupu Published by Live and Invest Overseas Altos del Golf, Loma Alegre, Calle Los Tulipanes, Casa B1, Panama City, Republic of Panama

Publisher: Kathleen Peddicord

Copyright © 2011 Live and Invest Overseas. All rights reserved. No part of this report may be reproduced by any means without the express written consent of the publisher. The information contained herein is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. www.liveandinvestoverseas.com

Panama [EscribaCountry texto]Monograph

T A B L E O F C ONTENTS Government ...... 3 Economy and resources ...... 4 Climate ...... 4 Panama City Climatological Information ...... 5 Population and society ...... 5 Infrastructure ...... 6 Practical information ...... 6 Special benefits for retirees ...... 7 Cost of living ...... 7 Cost of housing ...... 9 Health care ...... 9 Taxes ...... 10 Territoriality and Residence ...... 10 Gross Income...... 10 Deductions and Allowances ...... 10 Tax Credits ...... 11 Other Taxes ...... 11 Tax Authorities ...... 11 Further Reading ...... 11 Recommended Resources ...... 12

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National name: República de Panamá/Republic of Panama

Area: 77,100 square kilometers/29,768 square miles

Capital: Panamá

Major towns/cities: San Miguelito, Colón, David, La Chorrera, Santiago, Chitré, Changuinola

Major ports: Colón, Cristóbal, Balboa

Physical features: coastal plains and mountainous interior; tropical rainforest in east and northwest; Archipelago de las Perlas in the Gulf of Panama; Panama Canal

Government

Head of state and government: Ricardo Martinelli Berrocal from 2009

Political system: liberal democracy

Administrative divisions: nine provinces and three Autonomous Indian Regions (comarcas)

Political parties: Democratic Change or CD [Ricardo Martinelli]; Democratic Revolutionary Party or PRD [Francisco Sanchez Cardenas]; Nationalist Republican Liberal Movement or MOLIRENA [Sergio Gonzalez-Ruiz]; Panamenista Party [Juan Carlos Varela Rodriguez] (formerly the Arnulfista Party); Patriotic Union Party or UP (combination of the Liberal National Party or PLN and the Solidarity Party or PS)[Anibal Galindo]; Popular Party or PP [Milton Henriquez] (formerly Christian Democratic Party or PDC)

Armed forces: no active army

Death penalty: laws do not provide for the death penalty for any crime

Defense expenditures (% GDP): 1 (2006)

Education expenditures (% GDP): 3.8 (2008)

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Economy and resources

Currency: balboa (on parity with the U.S. dollar)

GDP (US$): 27.2 billion (2010)

Real GDP growth: 7.5% (2010)

GNI per capita (PPP) (US$): 12,700 (2010)

Consumer price inflation: 3.5% (2010)

Unemployment: 6.5% (2010)

Public debt (%GDP): 40 (2010)

Major trading partners: U.S., Japan, China, Singapore, Germany, Italy

Resources: copper, mahogany forests, shrimps, hydropower

Industries: construction, brewing, cement and other construction materials, sugar milling

Exports: bananas, shrimps, sugar, coffee, clothing. Principal market: Greece 21.03% (2009)

Imports: capital goods, foodstuffs, consumer goods, chemicals. Principal source: Japan 36.21% (2009)

Arable land: 7.26%

Agricultural products: bananas, rice, corn, coffee, sugarcane, vegetables, livestock, shrimps

Climate

Panama’s tropical climate has two seasons, one dry and one rainy. Variations depend on the region and altitude. The Caribbean coast sees rain year-round, while the Pacific coast has a more pronounced dry season. The Azuero Peninsula has an extremely arid climate during the dry season. In contrast, the mountains get plentiful rain during the wet season.

Variations in temperature are linked to altitude in Panama. Coastal temperatures regularly reach 95°F (35°C). The temperature drops 34°F (1°C) for every 150 meters (nearly 500 feet). Those who would rather avoid hot and humid weather might prefer the cooler regions: El Valle, Boquete, Volcan, and Cerro Azul.

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Panama City Climatological Information

Mean Temperature oF Mean Total Rainfall Mean Number of Month Daily Daily Minimum Maximum (mm) Rain Days Jan 65.3 92.1 29.3 2.9 Feb 65.1 93.6 10.1 1.3 Mar 65.1 94.6 13.1 1.4 Apr 67.1 95.7 64.7 4.9 May 70.0 94.1 225.1 15 Jun 70.3 92.8 235.0 16 Jul 69.8 93.0 168.5 14 Aug 69.6 93.0 219.9 15 Sep 69.8 91.2 253.9 17 Oct 69.4 90.7 330.7 20 Nov 68.5 91.2 252.3 16 Dec 66.6 91.9 104.6 7.5

Population and society

Population: 3,460,462 (2010)

Population growth rate: 1.4% (2010)

Urban population (% of total): 75 (2010)

Age distribution (% of total population): 0–14 28.6%, 15–64 64.2%, 65+ 7.2% (2010)

Ethnic groups: about 70% mestizos (of Spanish–American and American–Indian descent), 14% West Indian, 10% white American or European, and 6% Indian

Languages: Spanish (official), English

Religion: Roman Catholic 85%

Education (compulsory years): 8

Literacy rate: 92.5% (men); 91.2% (women)

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Labor force: 6% agriculture, 18% industry, 76% services (2009)

Life expectancy: 75 (men); 80 (women) (2010)

Child mortality rate: (under one year old, per 1,000 live births) 11.64 (2010)

Internet users: 959,800 (2009)

Infrastructure

Airports: 118 (2010). Main international airport: Tocumen

Railways (total length): 76 kilometers

Roads (total road network): 11,978 kilometers, of which 4,300 kilometers paved (2002)

In Panama, the infrastructure as a whole is good—and far superior to that of other Latin American countries. Accessible roads, daily flights to the U.S., and reliable public transportation all make Panama an easy place to get around.

Practical information

Visa requirements: no visa is required for a stay of up to 90 days

American embassy, Building 783, Demetrio Basilio Lakas Avenue Clayton, Panama; tel. (507) 207-7000

American Chamber of Commerce and Industry of Panama, P.O. Box 0843-00152, Panama; tel. (507) 301-3881; fax (507) 301-3882

Office hours: 9 a.m.-5 p.m., Monday to Friday

Banking hours: 8 a.m.-9 p.m. Monday to Friday; 9 a.m.-12 p.m. Saturday

Time difference: GMT-5. Same with U.S. Eastern Time before daylight savings.

Chief tourist attractions: Panamá; ruins of Portobelo; San Blas Islands, off the Atlantic coast; 800 sandy tropical islands in the Gulf of Panama

Major holidays: 1, 9 January, 1 May, 11–12 October, 3–4, 28 November, 8, 25 December; variable: Carnival (2 days), Good Friday

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Special benefits for retirees

Foreign residents and retirees are entitled to the following benefits:

 50% off entertainment anywhere in the country (movies, theaters, concerts, sporting events);

 30% off bus, boat, and train fares;

 25% off airline tickets;

 50% off hotel stays from Monday through Thursday;

 30% off hotels stays from Friday through Sunday;

 25% off at restaurants;

 15% off at fast-food restaurants;

 15% off hospital bills (if no insurance applies);

 10% off prescription medicines;

 20% off medical consultations;

 15% off dental and eye exams;

 20% off professional and technical services;

 50% closing costs for home loans.

To sweeten the deal, you are also entitled to a one-time tax exemption on the importation of household goods (up to US$10,000) and a tax exemption every two years for the importation or local purchase of a new car. An added bonus: Every bank in Panama has special express lines for retirees. It is required by law.

Cost of living

Las Tablas is our number-one recommendation in Panama if you want to retire to the beach on a budget. Las Tablas is a safe, friendly, charming colonial town on the Pacific coast that boasts a laid-back lifestyle at a bargain-basement cost. You can enjoy life in this coastal town of cowboys and fishermen on a budget of as little as US$1,200 per month.

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Sea-level temperatures in this country can be steamy. The climate is much more comfortable in Panama's interior highlands. Boquete isn't this country's only mountain town of note, but it is the best known and most developed. On the other hand, Boquete isn't as budget-friendly a choice as Las Tablas, and you would need around US$1,700 a month if you rent.

Panama City tops the list in terms of monthly expenses. In this cosmopolitan city, where you have access to the finest international cuisine, well-equipped hospitals, and all sorts of American products, it can cost you around US$2,000 a month to get by. In Panama City, El Cangrejo is one of the top choices right now for enjoying a comfortable expat lifestyle and we’ve prepared an itemized monthly budget to help you plan better:

Item U.S. dollars Remarks Based on renting an older apartment (figure US$1,000

for new)

Rent $800 HOA Fees $0 Property Taxes - Transportation $60 Occasional taxi fares Figure more if using Electricity $80 A/C Gas $5 Used for cooking Telephone $20 Internet $35 Cable TV $35 For a part-time maid (two Household Help, fulltime $300 full days per week), reduce to US$160 Food $300 Groceries Entertainment $400 Eating out, movies, bars, etc. Homeowner's Insurance $0 TOTAL $2,035

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Cost of housing

Panama City has become a complicated housing market, both for sales and for rentals. In the past few years, dozens of high-rise condo towers have been added to the city’s skyline. Apartments in these new, full-amenity buildings can cost as much as US$3,500 per square meter. Don’t pay it. Expect to pay around US$2,000 on average for a good area (Banking District, Avenida Balboa, El Cangrejo, among others).

If you want to purchase an apartment in Panama City today, shop for an older unit you can renovate. This can cost you half as much as a new apartment, even including the cost of the renovation.

The Panama City rental market is ridiculously competitive right now, because of the severe shortage of inventory. It’s possible to rent for less than US$700 a month if you shop through the local newspaper classifieds. It’s easier to find a rental through a real estate agent (most agents handle both sales and rentals), but agents don’t want to bother with the lower-priced apartments. If you go through an agent, expect to spend US$800 per month or more (as much as US$10,000 per month if you want super high-end, which exists).

Outside Panama City, the markets for both sales and rentals are less developed, and you’ll have to put in time on the ground to find what you want.

Health care

Panama offers world-class medical treatment in Panama City from English-speaking medical professionals often trained in the United States. Though most of the country’s large hospitals are found in the capital, each province also boasts a fully equipped facility. The most sophisticated facility in the region is Panama City’s Punta Pacifica Hospital, affiliated with Johns Hopkins International.

Panama’s health-care system is three-tier. Working Panamanian who pay into the Caja de Seguro Social, or social security system, use the facilities of the CSS and are not expected to pay for treatment.

Panamanians who are not insured through a private insurer or social security can use the facilities offered by the Health Ministry. These are called centros de salud, or health centers.

Medical treatment in Panama is affordable. A visit to a general doctor costs about US$25, and a specialist charges US$40 to US$50. Hospitalization costs about US$300 a day, depending on the facility.

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Local insurance companies offer very affordable health insurance options. Medisalud insures anybody, no matter the age. Ancon, another local insurer, insures until the age of 64 (in our special report, "Top Health Insurance Options For The Retiree Abroad," we outline Ancon's Panama Plus and the Global plans), and the Blue Cross/Blue Shield franchise insures until 63 (through their Medired Elite plan).

Monthly costs for a policy from one of these local Panama insurers are much more reasonable: US$118 for Medisalud, US$161.45 for Panama Plus, US$145.05 for Global, and US$167 for Medired Elite for a person of 62 years of age.

Taxes

Territoriality and Residence

Panama’s tax system is based on a territorial concept of income. Citizens and residents are taxed on income earned from Panama sources. Nonresidents are taxed only on income from Panama sources.

According to this territorial principle of taxation, compensation received in respect of duties performed wholly overseas will not be subject to Panama individual income tax. The system for determining this exempt income is to consider income related to the days spent outside Panama on job-related duties as foreign source, so that it is not liable to tax.

Gross Income

Employee gross income An employee is taxed on compensation earned for work done in Panama, regardless of where payment is made or received.

Capital gains and investment income Taxpayers pay a flat 10% rate on capital gains. Gains derived from the sale or transfer of real property are considered capital gains. Taxpayers that do not engage in business activities involving the transfer of real property are subject to a final 10% tax on capital gains derived from the disposition of real estate; however, a 3% withholding tax, which operates as an advance payment of the capital gains tax, will be levied on the higher of the sale price or the value of the property.

Deductions and Allowances

Individuals are entitled to: a basic deduction of US$800 (on a joint tax return); mortgage interest (up to US$15,000 per year); donations to non-profit organizations (up to US$50,000 per year); political contributions (up to US$10,000); and medical expenses incurred in Panama and not covered by insurance.

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The first US$11,000 is exempt and a rate of 15% applies from US$11,000 up to US$50,000, and 25% on the excess.

Tax Credits

No tax credits are allowed for income taxes paid to foreign countries.

Other Taxes

Social security taxes Social security tax is assessed at a rate of 9% on wages and other compensation paid.

Educational Insurance Tax Educational insurance tax is assessed at the rate of 1.25% on salaries and wages paid. There is no maximum limit on the taxable amount.

Local Taxes on Income There are no local taxes on income.

Tax Authorities

Ministry of Economy and Finance, Revenue General Office, Cadastral general Office, Customs General Office.

Further Reading

For a full report on Las Tablas, subscribe to our comprehensive monthly Panama e-zine, the Panama Letter. With it, we bring you the real Panama, warts and all. This is your chance to discover what it is really like to live in this country, without the sugar coating. This is the good, the bad, and the ugly, brought to you by a team of insiders, with, among them, decades of firsthand experience living, investing, and doing business in Panama. Understand, with their help, the opportunities that are right for you in the world‘s top retirement, lifestyle, investment, doing-business, and embarking-on-a-new- adventure haven. Each monthly issue spotlights a different top choice in Panama, from Panama City to Las Tablas, from Santa Fe to Boquete. Glossy magazines and websites tell you the best of Panama; we introduce you to all Panama. Learn more here.

We’ve published a Country Retirement Report covering our 2011 choice for Top Retirement Haven, El Valle de Anton. Less than a couple hours from Panama City, this mountain locale offers cooler weather and a peaceful quality of life. Go here for more.

If you‘re still not sure about Panama, we‘ve put together a comprehensive starter kit for you. A complete overview of the Hub of the Americas is available in our Panama Starter Kit. You can also access the country page on our website for more information.

If you‘re absolutely sold on Panama, you might consider our VIP hand-holding membership, the Panama Circle. Learn more here.

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Recommended Resources

Attorney Rainelda Mata-Kelly in Panama City is our number-one resource in this country, not only for legal issues, but also for all questions related to visas, residency, citizenship, taxes, property purchase, holding structures, corporations, banking, and investment incentives.

Rainelda Mata-Kelly P. O. Box 0818-00534 Panama City, Panama Tel. (507) 380-0606; Fax: (507) 263-4305 E-mail: [email protected]

For staying compliant back in the U.S. we recommend tax attorney Chris Rusch, whom you can contact through this page.

For real estate opportunities in Panama City and the surrounding beach areas you can get in touch with Mike Vuytowecz from Inside Panama Real Estate (http://www.IPREinfo.com) by calling 760-518-4059 (U.S. phone)/ (507) 6756-5850 (Panama), or by writing at [email protected]. In the Azuero Peninsula we recommend Michael Martinez, who is reachable by phone at (507) 661-35886/(507) 958-9836 or by e-mail at [email protected]. Also in the Azuero Peninsula you will find Los Islotes, a beautiful and well-designed development where you can enjoy the most spectacular sunsets in this country.

You will also acquire a wealth of information on this country, as well as meeting and conversing with the best experts in the areas of living, taxes, real-estate, etc. by joining our Live and Invest in Panama conferences, held twice a year in the capital city.

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